SoftBank-backed Indian tech startup Oyo to cut IPO size by two-thirds as tech valuations plunge
Amid the ongoing headwinds in the tech space, SoftBank-backed Indian hospitality startup Oyo is cutting its initial public offering (IPO) size as tech valuations fall, Bloomberg News reported on Monday.
Citing two people familiar with the matter, Bloomberg said that the decade-old startup is reducing the IPO shares it aims to sell via a stock-market debut by about two-thirds as part of the effort by the company’s founder to go public and pushing for sale as financial pressure intensifies.
One of the individuals familiar with the matter also told Bloomberg that Oyo intends to sell only a third of its originally planned new shares, which will reduce the amount of fresh capital the company is anticipated to obtain.
This move illustrates how Oyo’s 29-year-old founder, Ritesh Agarwal, is striving to move forward with the IPO even with less favorable terms, in an attempt to alleviate the financial pressure on the hotel and lodging booking company as well as himself. Despite the travel industry’s improvement since the pandemic lows, Oyo, which was once valued at roughly $10 billion as India’s answer to Airbnb, continues to experience increasing losses. Agarwal, on the other hand, took on a significant amount of debt to increase his ownership in the company.
The once-high-flying startup first announced the plan to go public about two years ago when it revealed it was planning to raise about 84.3 billion rupees ($1.16 billion) in an IPO, according to draft papers submitted to India’s market regulator. The paper further shows that Oyo plans to issue new shares worth up to 70 billion rupees while existing shareholders could sell shares worth up to 14.3 billion rupees.
The startup has been hemorrhaging money. Late last year, Oyo announced it is cutting 600 jobs in its corporate and technology departments.
Also in January 2020, about two months before the pandemic even started, the budget hotel chain startup laid off about 2,000 of its employees in China and India. Then in February 2020, its annual net loss widened to $335 million due to China’s expansion. Struggling to stay afloat, the company received a $5 million capital infusion from Microsoft Corp. Meanwhile, Japanese conglomerates SoftBank still owns a 46% stake in the company.
Founded in 2013 by Ritesh Agarwal, Oyo started mainly as a group of budget hotels. Oyo is now the world’s third-largest and fastest-growing hospitality chain of leased and franchised hotels, homes, and living spaces. Over a span of six years, the startup expanded its footprint globally with thousands of hotels, vacation homes, and millions of rooms in hundreds of cities in India, Malaysia, UAE, Nepal, China, Brazil, the UK, Philippines, Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, the United States and more.
Oyo backers include SoftBank Group, Greenoaks Capital, Sequoia India, Lightspeed India, Hero Enterprise, Airbnb, and China Lodging Group. OYO has raised a total of $3.2 billion in funding over 15 rounds. Its latest funding was raised on December 10, 2019, from a Series F round.